U.S. Markets closed

Is it Wise to Hold Prologis (PLD) Stock in Your Portfolio?

Zacks Equity Research

The industrial real estate category continues to witness soaring demand for space amid high-consumer spending, e-commerce boom, as well as a healthy manufacturing environment. Companies are making immense efforts to improve supply-chain efficiencies and shifting near to large population centers, propelling demand for logistics infrastructure and efficient distribution networks.

Amid this favorable environment, Prologis Inc. PLD is well poised to benefit from its capacity to offer modern distribution facilities at strategic in-fill locations. Particularly, the company provides industrial distribution warehouse space in some of the busiest distribution markets across the globe. Its properties are typically located in large, supply-constrained in-fill markets, which enjoy proximity to airports, seaports and ground transportation facilities, in turn, facilitating rapid distribution of customers’ products.

The company is actively banking on its growth opportunities through strategic acquisitions and opportunistic developments. Last August, the company completed the acquisition of DCT Industrial Trust, in an $8.5-billion stock-for-stock deal. The combined portfolio helped the company realize significant synergies and strengthen its position in key markets.

Further, the company’s large number of build-to-suit development projects highlights the advantageous location of its land bank, as well as demand from multi-site customers, many of whom are focused on e-commerce. These sites are positioned in urban markets that are suited for serving as the last warehouse before goods are delivered to consumers.

Further, Prologis is focused on bolstering its liquidity. The company exited 2018 with cash and cash equivalents of $343.9 million. Following the year end, it amended and restated its global credit facility, increasing the total capacity from $3 billion to $3.5 billion.

Being a market leader, Prologis has the ability to raise capital at favorable rates. The company’s concerted efforts have helped beef up its USD net equity exposure, in addition to extending the debt pile’s duration and lowering weighted average interest rate. Moreover, solid dividend payouts are arguably the biggest attraction for REIT shareholders, and Prologis’ dividend was raised this February by 10% to $2.12.

Nevertheless, recovery in the industrial market has continued for long, and a whole lot of new buildings are slated to be completed and made available in the near term. This will lead to higher supply, and lesser scope for rent and occupancy growth.

Also, of late, the domestic economy has been losing steam and concerns are brewing up regarding the fate of the U.S. economy amid prevalent trade-war tensions, the economic slowdown in Europe and China, as well as the declining stimulus from the lower tax rates. In fact, any protectionist trade policy will have an adverse impact on economic growth. This, in turn, might affect the company’s business and limit its growth tempo.

Prologis currently has a Zacks Rank #3 (Hold). The company’s shares have gained 24.1% in three months’ time compared with the industry’s rise of 16.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Ashford Hospitality Trust, Inc’s AHT shares have gained 17.8% over the past three months. At present, the stock flaunts a Zacks Rank of 1.

Plymouth Industrial REIT, Inc’s PLYM shares have appreciated 11.4% in the past three months. Currently, the stock sports a Zacks Rank of 1.

Alexandria Real Estate Equities, Inc’s ARE shares have appreciated 26.6% in three months’ time. The stock currently carries a Zacks Rank #2 (Buy).

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>